If I recall, many of our beek friends think declaring the biggest debtor of all time (the Feds) bankrupt would be a disastrous plan (I disagree), so I wonder what y'all think about a smaller public entity like Detroit filing for Bankruptcy? A good thing? A bad thing?

If I recall, many of our beek friends think declaring the biggest debtor of all time (the Feds) bankrupt would be a disastrous plan

not sure how you would declare bankruptcy of the US and go through some kind of reorganization. seems to me, we need the reorganization first on that one.

i agree with sawdustmakr. bankruptcy, in the normal way (not the GM way) allows an entity to rework it's debt. we will be on the hook for any federally guaranteed pensions, etc. other than that, it should be up to the court, city, and debtors to work things out. no other tax payer money should be spent on it.

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.....The greatest changes occur in their country without their cooperation. They are not even aware of precisely what has taken place. They suspect it; they have heard of the event by chance. More than that, they are unconcerned with the fortunes of their village, the safety of their streets, the fate of their church and its vestry. They think that such things have nothing to do with them, that they belong to a powerful stranger called the government. They enjoy these goods as tenants, without a sense of ownership, and never give a thought to how they might be improved.....

we will be on the hook for any federally guaranteed pensions, etc. other than that, it should be up to the court, city, and debtors to work things out. no other tax payer money should be spent on it.

That’s the fundamental problem with most of the city and state debt problems; the pensions and lucrative union contracts. It’s questionable rather or not those can be reorganized (ie cut) in a bankruptcy. They sure as heck can be (and are) cut in private industry, but a public entity like Detroit, we don’t know where the legal bounds really are. The legal eagles here say the Supreme Court will ultimately have to decide rather public pensions and union contracts can be changed in a bankruptcy. If the court rules they can’t, then Detroit and the rest of the debt ridden cities and States will forever be in the hole because there would be no effective mechanism to reduce overly generous legacy costs. Much like the old GM, basically doomed. :(

On the other hand, if we do as beeks want and go with Bankruptcy it will have tax repercussions for all the rest of y’all too! If Detroit goes bankrupt, the “investors” of Detroit’s bonds will only get pennies on the dollar. Investors don’t invest in things where dollars can turn into pennies UNLESS they are going to get an extra ordinary high interest rate on their loaned money. Meaning, the interest payments Cities all across America will have to pay to borrow money could go up, way up. That will hit the pocket books of most beeks because debt (bonds) is how most cities fund new schools, repairs, roads, bridges, unbalanced budgets, etc.

So is the satisfaction of seeing Detroit go bankrupt worth the extra dollars in local property taxes y’all will have to pay because investors will now demand more to buy your community's muni bonds?

So is the satisfaction of seeing Detroit go bankrupt worth the extra dollars in local property taxes y’all will have to pay because investors will now demand more to buy your community's muni bonds?

this assumes this:

That will hit the pocket books of most beeks because debt (bonds) is how most cities fund new schools, repairs, roads, bridges, unbalanced budgets, etc.

different states and cities do things in different ways, but here a bond issue is approved by the voters. if the voters are dumb enough to approve, i guess they are on the hook.

i find it hard to see why any investor would have been buying anything to do with Detroit for at least the last decade. investors, as you point out, expect a return and they knew they wouldn't get onr there. that's probably part of the debt problem that they couldn't get anyone to "invest".

the solution is simple. don't spend what you don't have IN HAND. getting to that solution is going to be a painful journey. yes, if it means i have to take it in the backside a couple of times while the rest of the folks learn that lesson, so be it. just don't ask me to bail out the folks who made the bad choices in the first place. and if you are going to buy bonds, buy Puerto Rico rum bonds :-)

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.....The greatest changes occur in their country without their cooperation. They are not even aware of precisely what has taken place. They suspect it; they have heard of the event by chance. More than that, they are unconcerned with the fortunes of their village, the safety of their streets, the fate of their church and its vestry. They think that such things have nothing to do with them, that they belong to a powerful stranger called the government. They enjoy these goods as tenants, without a sense of ownership, and never give a thought to how they might be improved.....

If you find it hard to believe anybody would buy Detroit’s bonds, then you must be flabbergasted that ANYBODY buys the Feds bonds? The Federal Government make Detroit’s financiers look like Goldman Sachs! That is where your logic falls apart and why it MIGHT be dangerous to let Detroit go through Bankruptcy.

Investors seem to assume SOMEBODY will always bail out a Government entity and hence they accept modest interest rates when loaning money to local, state, and federal government debt bonds. If the Detroit bankruptcy is successful and investors (bond holders) take a bath (pennies on the dollar), that illusion of low risk municipal bonds will forever be tarnished and EVERY city will have to pay higher rates to get people to invest in their muni bonds. Your property taxes go to service those debt payments so YOU end up paying higher taxes if Detroit goes down.

I think a bankruptcy is completely pointless if pensions and union contracts can’t be re-organized (ie cut) because you end up with a city which is still doomed financially AND in the process you’ve spooked investors across the nation who will demand higher interest rates on all government bonds (your taxes pay those off).

Detroit is just a drop in the ocean compared to the debts in California, or even lovely Oregon. Are Californian’s ready to pony up even more taxes just to make interest payments on their massive debt? Before long California’s income tax rate will be as high as Oregon's :evil:.

Bluebee, Don't you think it is time for all the cities to stop selling bonds and start making ends meet. That is what got them in trouble in the first place. It just puts the burden on the next generation because of their inability to live within their means.Jim

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"If you don't read the newspaper you are uninformed. If you do read the newspaper you are misinformed."--Mark Twain

If the Detroit bankruptcy is successful and investors (bond holders) take a bath (pennies on the dollar), that illusion of low risk municipal bonds will forever be tarnished and EVERY city will have to pay higher rates to get people to invest in their muni bonds. Your property taxes go to service those debt payments so YOU end up paying higher taxes if Detroit goes down.

as sawdstmakr said, it's time for the people to put a stop to it. if the people hurt, they will demand change. if they don't, or don't realize the hurt that is inflicted by way of the feds bailing everything out, they won't. i have long said that the cure will be painful for all. the government is trying to delay the pain so they don't have to deal with the demands. thing is, we are almost to the point where no cure will work.

as for spooking investors, they are already spooked. at least the smart ones are. a lot of the debt buying has already been transferred to the feds. that's what all this pumping is about. you are thrilled by the stock market rise, but it's not a good thing. investors are there because they have no other place to go and they are ready to jump out at the first sign that the federal reserve is going to stop pumping. anyone not investing in the stock market, is holding money because there is no other place to put it. they are not even investing in their own expansion.

it's not just us, it's all over the world. everyone knows it. it's just a matter of when it's all going to crash down.

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.....The greatest changes occur in their country without their cooperation. They are not even aware of precisely what has taken place. They suspect it; they have heard of the event by chance. More than that, they are unconcerned with the fortunes of their village, the safety of their streets, the fate of their church and its vestry. They think that such things have nothing to do with them, that they belong to a powerful stranger called the government. They enjoy these goods as tenants, without a sense of ownership, and never give a thought to how they might be improved.....

Of course the cities and the Fed should live within their means. I’m all for a Detroit bankruptcy IF the structural costs can be cut. If the courts aren’t going to allow government worker pensions and benefits to be on the chopping block, then what is the point of a bankruptcy? Just zeroing out the bond holders gets you nothing but higher taxes for everybody. I also think the Feds should officially declare bankruptcy and re-organize (cut), since they/we are basically bankrupt.

Most cities and states aren’t running with cash surpluses and hence have to sell bonds to fund things like school “improvements”, roads, water and sewer fixes, etc. Would it really be a good idea to allow the states and cities to run surpluses for “rainy day” funds by raising taxes more? What normally happens to any government surplus!

you are thrilled by the stock market rise, but it's not a good thing. investors are there because they have no other place to go

:? :? :?Are you kidding me? There’s real-estate, commodities, forex, foreign markets, bonds, art, new businesses, the list is almost endless. The stock market isn’t going to burst when the Feds stop buying bonds; it’s the bond bubble that will burst. Read last week that bonds had the biggest drop (interest rate increase) in 26 years! A 30 year loan at 3 or 4% is unnaturally low.

Bluebee, PLEASE, go back and read you latest posts. They are starting to make sense. You've got to put a stop to it. What will you and I have to argue about if you keep this up? :-* :-D

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"Listen to the mustn'ts, child. Listen to the don'ts. Listen to the shouldn'ts, the impossibles, the won'ts. Listen to the never haves, then listen close to me . . . Anything can happen, child. Anything can be"